Monetary policy

The Reserve Bank uses monetary policy to maintain price stability and support maximum sustainable employment as defined in the Remit to the Monetary Policy Committee (MPC). The current Remit requires the Bank to keep inflation between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint. There is no numerical target for employment, as the Bank uses a range of different indicators to assess the maximum sustainable level. The Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed seven times a year.

The Reserve Bank publishes its Monetary Policy Statement (MPS) quarterly. Each Monetary Policy Statement must set out:

  • The approach the Monetary Policy Committee (MPC) is taking to achieve its operational objectives defined in the Remit;
  • The MPC’s reasoning for adopting that approach, and;
  • The transparency and accountability requirements of the MPC Charter:
    • explain how the MPC has sought to meet the requirements of section 2b of the Remit;
    • if inflation outcomes (and/or expected outcomes) are outside of the target range, explain the reason for this;
    • explain how monetary policy is currently supporting maximum sustainable employment.

The Reserve Bank uses monetary policy to maintain price stability and support the maximum sustainable level of employment as defined in the Remit. The current Remit requires the Bank to keep inflation between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint. The Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed seven times a year.

Inflation is the term used to describe a rise of average prices through the economy. It means that money is losing its value. This section provides a variety of resources that explain inflation and deflation. This connects to how the Reserve Bank uses monetary policy to maintain price stability.

The Reserve Bank uses monetary policy to control inflation and keep it within a specific target band. Find out about how the Reserve Bank uses and implements monetary policy to maintain price stability.

The Monetary Policy Committee (MPC) is responsible for formulating monetary policy in New Zealand, directed towards the economic objectives of:

  • achieving and maintaining stability in the general level of prices over the medium term; and
  • supporting maximum sustainable employment.

The Remit, Charter and Code of Conduct are key components of New Zealand’s monetary policy framework. The Remit provides the Monetary Policy Committee (MPC) with its operational objectives, consistent with the economic objectives in Section 8 of the Reserve Bank of New Zealand Act (1989).

The MPC will also be bound by the MPC Charter. The Charter provides directions on decision making procedures, transparency and accountability.